Transcript A history of enterprise wide integration

A history of enterprise wide
integration
From acronym to acronym
EOQ / BOMP / MRP / MRP II /
ERP / ERM / ERPII
Time frame and key milestones
EOQ
Safety Stock
Theoretical /
conceptual
Improvements in
management
techniques
BOMP
Work Orders
1950s
MRP
1965
MRPII
1975
ERP
1990
ERM / ERPII
2000
Time frame and key milestones
EOQ
Safety Stock
Computing power
enables completely
integrated
manufacturing
solution
BOMP
Work Orders
1950s
MRP
1965
MRPII
1975
ERP
1990
ERM / ERPII
2000
Time frame and key milestones
EOQ
Safety Stock
More functions
become
Integrated in the
process
BOMP
Work Orders
1950s
MRP
1965
MRPII
1975
ERP
1990
ERM / ERPII
2000
Time frame and key milestones
EOQ
More functions
become
Integrated in the
process +
technology
improvements
Safety Stock
BOMP
Work Orders
1950s
MRP
1965
MRPII
1975
ERP
1990
ERM / ERPII
2000
Time frame and key milestones
EOQ
Safety Stock
More functions
become
Integrated in the
process to add up
to complete
business solution
BOMP
Work Orders
1950s
MRP
1965
MRPII
1975
ERP
1990
ERM / ERPII
2000
Material Requirement Planning
• Emerged from BOMP in 60s
• Conversion of production plan for parent items
(finished products) into a production plan of
production or purchasing for component items
• Explosion of the requirements for a top level
item through the BOM to generate component
demand
• Executed at each level of Assembly / subassembly
Principles of MRP
• System to plan and control production and
material flows
• core principle:
demand for material, parts and components
depends upon the demand for finished product
• Chain of causality from finished goods
back to inventories:
– possible to reduce inventory to the minimum
– plan for procurement based on actual needs
– able to cater for “lumpy” (i.e. dependent)
demand
BOM = Recipe or formula
• How to produce our products
• List of components including possible
substitutes
• How much of each
• Special conditions of operation
• Expected yields and labour productivity (i.e.
standards)
• Extrapolate a cost per unit
• Stored in a Bill of Material (BOM)
Example: Bill of Material for
desk
1 – List out the components
2 – describe the steps required for assembly
3 – arrange them in a possible manufacturing
sequence
Solution
Desk
Top (1)
Screw Kit (1)
Adjustable legs (4)
Frame (1)
3 way junctions (4) Painted tubing (4)
Painted metal legs (4)
Leg Tubes (4)
Long Tubes (2) Short Tubes (2)
Paint (1 dl)
Paint (0.6 dl)
How MRP works
• Master production schedule: drives the
system based on customer orders
• Bill of material (dependent demand)
• Inventory status file
• MRP package - contains the logic
See diagram next page
Master Production Schedule
Open Purchase Orders
Inventory
master part file
Open Shop Orders
MRP logic
Module
Reports:
+ planned order releases
+ Purchasing plan
+ work orders
Is this a good plan???
BOM
Master Production Schedule
Open Purchase Orders
Inventory
master part file
Open Shop Orders
MRP logic
Module
Reports:
+ planned order releases
+ Purchasing plan
+ work orders
Is this a good plan???
BOM
Benefits of MRP
• Understanding the implications of changes in
production schedule (by de-expediting parts)
• Keeping inventory low (25% decreases
reported) while removing risk of stock-outs
• Better planning leading to:
– reduction in lead times
– better use of capacity
– lowered risk of obsolete production (e.g. engineering
firms)
• Early warning system: earliest delivery dates are
known before promises are made
Without MRP
Safety Stock
Demand variations
With MRP
Safety Stock
Demand variations
Integration of design and
manufacturing
• integration of operations with upstream design
activities and downstream sales activity
• downstream: e.g. by integrating CAD with Bill
of Material
• new designs go on-line immediately
• no production of obsolete products /
assemblies
• shorter time to market for new pdts
The Rise of MRP
• Snowball effect as companies moving to MRP
imposed business changes to their partners
• MRP logic was always around, but switching
costs in manufacturing made it worthwhile:
– data processing costs decreasing
– inventory costs rising
• Sophisticated CIM systems easier to justify
• Other external pressures mean that tighter
control is required
Master Production Schedule
Planned production
Sales orders
Open Purchase Orders
Open Shop Orders
Bill of resources
Inventory
master part file
MRP II logic
Module
BOM
Product routings
CRP / RCCP
Reports:
OK Y/N?
+ planned order releases
+ Purchasing plan
+ work orders
+ dispatch plan
Move to MRP II
Extension to ERP functionalities
• Natural extension of MRPII
• Mix of two competences:
– Engineering
– Finance
• Mix of targets
– Efficiency
– Control / consolidation
• End to end business processes
ERP Capabilities
• Accounting / finance:
–
–
–
–
Fixed Assets
cash management
product cost accounting
A/R & A/P & G/L…
• Production planning and materials planning
–
–
–
–
–
–
–
–
–
–
Purchasing / purchase order management
p/o receiving
inventory management
Bill of materials
Engineering changes
Product routings
MRP, production planning, CRP
Work orders
Warehouse management
maintenance
ERP capabilities (2)
• HR management
– travel expenses
– Payroll
– personnel planning
• sales and distribution
–
–
–
–
–
sales planning
Sales order management
quality control
Forecasting
Configuration management / sales quotes
• Address book function:
– Customer file, supplier file, employee file etc…
• e.g. Microsoft spent 10 months and $25 ms replacing 33
different systems in 26 sites with SAP
ERP stories
– Whirlpool: hundreds of distributors receive no deliveries
after the update of the SAP software.
– Hershey: Despite $112 million spent on SAP R/3 all shops
empty on Halloween week.
– Allied Waste Industries: ERP project stopped after $130
million investment
– Waste Management Inc.: same after $45 million
investment
– Unisource Worldwide and Dell also cancelled their projects
– Foxmeyer: after three years of unsuccessful
implementation, company sues SAP and AA before going
bankrupt……………
Buying software
• Untypical IS projects
• Balancing analysis of requirement with
search for right supplier
• Trading off conflicting requirements
• Preparing for the project
• Project management
• Handling business disruption
• Measuring progress and success
AcceleratedSAP - The Tool
for Successful
Implementations
Project
Preparation
 Provide initial

planning, scoping, and
preparation for SAP
transformation
projects.
Business
Blueprint
Conceptualise and
document the final
SAP and non-SAP
operational
environment based
on new information
and business
process designed
requirements.
Realisation
Final
Preparation
 Implement the
 Complete testing,
information,
end-user training,
business process
system
and technical
management and
requirements based
cutover activities.
on the Business
Blueprint developed
during the previous
phase.
Go-Live
Support
 Take client from a
pre-production
environment to a
live production
operation and to
design and
implement a longterm end users
support
organisation.
Decision making process
Intelligence
Design
Choice
Review
(Herbert Simon)
ERP Software
ERP
Software
Selection
Implementation
Vendor Independent Process
Organisational
Preparation
Analysis
of needs
Vendor guided Process
Business Process
Design
Selection
Implementation
of Software
Review
of benefits
Top Issues Organisations Face During Enterprise Resource Planning
Change Management
15%
8%
Internal Staff Adequacy
7%
Training
6%
Issues/Obstacles Until Now
Project Team
Prioritisation/Resource Allocation
5%
Consultants
5%
Ownership (of benefits to others)
5%
PEOPLE 57%
4%
Top Management Support
10%
Program Management
5%
Process Reengineering
3%
Benefit Realisation
PROCESS 20%
2%
Stage/Transition
3%
Software Functionality
Application Portfolio Management
3%
Enhancements/Upgrades
1%
Data
1%
Reporting
1%
0%
TECHNOLOGY 7%
KNOWLEDGE ASSETS 3%
2%
4%
6%
8%
10%
12%
Percentage of Total Mentions
(Multiple answers per respondent)
14%
16%
18%
Intelligence phase / requirements
analysis
• Understand
– Identify stakeholders
– Develop common vision
– Make up a business case
• Design
– Draw up business maps
– Design the ITT
• Identify vendors
• Solicit tender documents
• Choice
– Analyse / find best fit
– Negotiate
– chose
Analysing Fit
•
•
•
•
Functionality grid
Break down per functional area
Down to process stage level
Ask vendors to rate fit
–
–
–
–
Not supported
Supported with mod / workaround
Supported with minor alteration
Fully supported
• Score and recommend (see diagram)
Package Enabled Approach
Review
As-Is Process
Yes
Does ERP
Fit?
Best
Practice?
Yes
Implement ERP
Base Package
No
ERP Enabled
Reengineering
Yes
No
No
Business
Impact?
Yes
Develop
Workaround
No
Does
ERP Fit?
Team creation
•
•
•
•
•
•
Multi-disciplinary
Full time
Decision making power
Budget
Representative – team leads
Balance between allegiance to team and to area
of competence
• Team spirit
• Team awareness
• Must have support from organisation